FOUNDATION OF THE BAKU-TBILISI-CEYHAN PIPELINE LAID

style="mso-fareast-font-family:"MS Mincho"">On September 18, the building of the
Baku-Tbilisi-Ceyhan Main Export Pipeline was launched in Baku. The significance of this
event was illustrated by the presence of the Presidents of Azerbaijan, Heydar Aliev,
Georgia, Eduard Shevarnadze, and Turkey, Ahmet Necdet Sezer, as well as the U.S. Secretary
of Energy Spencer Abraham, With spades, they laid down the "first stone" of the
pipeline's foundation, and buried a time-capsule of stainless steel with a message to
future generations.

style="mso-fareast-font-family:"MS Mincho"">The 1730 km pipeline will be welded
from 144,000 steel pipes with a diameter of 42 inches. Construction will take 30 months,
and the capacity of the pipeline will be 50 mln tones of oil per year. To fill the
pipeline with oil will require 10 million barrels of oil. The cost is estimated at just
under $3 billion. Actual construction works will begin in spring 2003 and be finished by
autumn 2004. After putting the MEP into operation, the annual income of Azerbaijan should
be between $700 million and 1 billion, depending on export prices, calculated at $20-25
per barrel.  In other words, by 2010,
Azerbaijan's oil income may reach $ 5bln.

style="mso-fareast-font-family:"MS Mincho"">According to the executive director
of the State Oil Fund of Azerbaijan (SOFAR) Samir Sharifov, it is possible that figures
would change during the work. It is known that the expenses on building MEP are divided
into 2 parts, investments of participant companies (30%) and loans from international
financial institutions, export credit agencies and commercial banks. The stockholders of
this project are presently: B? - 34,76%, SOCAR - 25,00%, Unocal - 8,90%, Statoil - 8,71%,
T?AO - 6,87%, ENI - 5,00%, TotalFinaElf - 5,00%, ITOCHU Oil - 3,40%, Amerada Hess - 2,36%,
Japan Inpex  - 2.5%.

style="mso-fareast-font-family:"MS Mincho"">Speaking at the ceremony Azerbaijani
President Heydar Aliyev noted that the launching of the Baku-Tbilisi-Ceyhan oil pipeline
is the result of 10 years of hard work on the realization of Azerbaijan's oil strategy.
"Beginning in September 1994, after the 'contract of century' had been signed,
numerous attempts were made by external forces to upset or postpone the realization of
Azerbaijan's oil projects. But neither threats, terrorist acts, nor pressure could force
Azerbaijan to give up its chosen way. The realization of the project would have been
impossible without the political and moral support of the U.S. The building of this
pipeline, and of the Baku-Tbilisi-Erzurum gas pipeline, will allow to the strengthening of
stability and security in the South Caucasus region and bind Azerbaijan, Georgia and
Turkey closer together", the President said.

style="mso-fareast-font-family:"MS Mincho"">Speaking at the ceremony, U.S.
Secretary of Energy Spencer Abraham emphasized one more time that the exploration of
Caspian energy resources and the BTC pipeline is one of the most important facets of the
U.S. regional strategy. He read a letter from the U.S. president, expressing hope that BTC
would help strengthen independence of regional countries. Besides, the heads of state of
France, Norway and the UK sent their congratulations.

style="mso-fareast-font-family:"MS Mincho"">Only Russia among regional players
did not send its congratulations. According to some analysts, the fact that Russian
companies are not involved in the MEP reduces Moscow's chances style="mso-spacerun: yes">  to influence the countries taking part in this
project. Projections that the Russian company Lukoil would join the stakeholders in the
pipeline did not come true. Russia will lose billions of dollars as oil and gas flows from
the Caspian region outside its territory.

style="mso-fareast-font-family:"MS Mincho"">Almost all Russian mass media
including TV ignored the event in Baku, and even where some publications appeared covered
it, they did so with negative comments. President Putin did not consider it necessary to
congratulate Azerbaijan on the event. Minister of foreign affairs Igor Ivanov did it in a
rather original way, stating that oil fields in the Caspian region are not sufficient to
cover the expenses of such a huge project. Ivanov also sharply accused attempts to exclude
Russia from the region, where it has "historical interests". style="mso-spacerun: yes">   Another Russian official hinted that the
"building of pipeline would not be easy". yes">
  Earlier, Russian Prime Minister  Mikhail
Kasyanov threatened that Russia would resist efforts to deprive it of a dominating role
over regiona energy resources, and could use economic sanctions.

style="mso-fareast-font-family:"MS Mincho"">Strange as it may seem, it is not
Azerbaijan, the country possessing oil, but Georgia - the transit country - that is
suffering under Russian pressure. According to experts, all events related to the Pankisi
gorge are related to BTC. In view of such a
regional environment, pipeline security is an issue of vital importance. BTC security is
planned to be ensured by all available means of the countries through whose territories
the pipeline will pass. He noted that member countries of the project are not intending to
militarize the pipeline, but necessary measures on securing the pipeline from terrorist
acts would be undertaken. In this regard each government must secure the pipeline in the
way it considers necessary. For these aims, special subdivisions with mobile forces with
special equipment and helicopters, will be established, according to the Head of SOCAR,
Natiq Aliyev. Simultaneously, the SOCAR chief
mentioned the possibility of using NATO experience in combating terrorism. Regarding
technical safety of the pipeline, i.e. preventing oil leak, the pipeline company will be
responsible for this.

style="mso-fareast-font-family:"MS Mincho"">Thus, BTC will make its contribution
to the creation and development of a transport corridor between Europe and Asia and the
recreation of the Great Silk Road. The oil pipeline would bring not only Azerbaijan,
Georgia and Turkey closer, but also other countries of the Caspian region. In particular,
the prospect of Kazakhstan and Turkmenistan joining BTC is paramount in this context.

style="mso-fareast-font-family:"MS Mincho"">Gulnara Ismailova